real estate agent and home buyers

What Credit Score Do You Need To Buy A House in 2021?

Kim Porter3-Minute Read
October 29, 2020

When looking to get a mortgage, it helps to know what credit score is needed to buy a house. Your credit score impacts both your eligibility for the loan and the interest rate you get.

The minimum credit score to buy a house with a conventional loan is 620—though you may qualify with a lower score if you’re seeking an FHA, VA or USDA loan. Homebuyers with a credit score of 760 and above are more likely to qualify for the best interest rates on a mortgage.

If your credit score needs work, there are ways to improve it before applying for a mortgage. Here’s what to know.

Minimum Credit Score To Buy A House By Loan Type

The minimum credit score varies depending on the type of mortgage you get and who insures the loan. Eligibility requirements are looser for mortgages backed by government agencies, including the Department of Veterans Affairs, Department of Agriculture and the Federal Housing Administration. The minimum credit score for conventional loans and jumbo loans is often higher because these aren’t insured by the government. Here are the minimum credit score requirements for several types of mortgages: 

mortgage type minimum credit score chart

What Is A Good Credit Score For Getting a Home Loan?

To qualify, you’ll need at least the minimum credit score to buy a house, which ranges from about 500 – 680, depending on the mortgage program. But a higher credit score can boost your chances of qualifying for a mortgage because it shows the lender you’re likely to repay your loan on time.

During the application process, lenders commonly check the borrower’s FICO® credit score, which grades consumers on a scale of 300 – 850, with 850 being the highest score possible. The best credit score to buy a house is 760 or higher. According to FICO® data, borrowers with a credit score in this range tend to get the best interest rates on a home loan.

How Does Credit Score Affect Your Interest Rate?

The interest rate you receive on a home loan is largely tied to your credit score. Generally, borrowers with higher credit scores qualify for lower mortgage rates, which can save them thousands of dollars over the life of a mortgage.

Every lender will have a different formula for setting your interest rate, but even a small difference on your credit score can help you save substantially. For example, bumping your credit score from 660 – 700 may help you shave $61 off your monthly payment on a $300,000 mortgage. That’s a difference of $21,960 over a 30-year mortgage term.

Can You Get A Mortgage With Bad Credit?

A bad credit score for a mortgage is below 620. While it’s possible to get a mortgage with a low credit score, you’ll pay higher interest rates and have higher monthly payments.

If your credit score is lower than the minimum required, you might still be able to get the loan if you add a co-signer to the mortgage, use a larger down payment or lower your debt-to-income ratio.

Improving Your Credit Score

If you’re considering applying for a mortgage, it’s a good idea to check your credit score to see if there’s room for improvement.

Start by requesting your credit reports and looking for errors, which could potentially drag down your credit scores. You can get a free credit report from TransUnion®, Equifax® and Experian every week through April 2021. If you find inaccurate information, file a dispute with the creditor and the credit reporting agency. Getting rid of errors may help boost your credit score.

Next, get to know how credit scores work. Here’s a list of what influences your credit score and how to make improvements before applying for a mortgage:

  • Payment history: This factor makes up 35% of your credit score, so paying your bills on time can boost your credit. Set up monthly reminders or automatic payments if you need help remembering.
  • Credit utilization: This refers to the amount of your available credit you’re using. Try to pay down some of your loan balances and keep your credit card balance to 30% of your credit limit or less.
  • Length of credit history: A long credit history shows lenders you have experience managing debt. Aim to keep credit cards open, even if you rarely use them, to bolster this part of your credit score.
  • New credit: A lender might be wary if you apply for credit often because it could cause you to fall behind on your bills. Refrain from opening new credit accounts before buying a home.
  • Credit mix (10%): Having different types of credit accounts open – like credit cards, student loans and a car loan – can positively influence your credit scores. When you get a mortgage, it will likely help your credit score because it adds to your credit mix.

Get the right home loan for you.

Kim Porter

Kim Porter is an experienced personal finance writer who focuses on mortgages, credit cards, student loans, debt and more. She has a B.A. in journalism from the University of Florida. You can find her on Twitter at @kimsavesmoney or on LinkedIn.